Asian Shares Fall; Tokyo Market Struggles With Strong Yen

ShriNavaratnam

SINGAPORE (MarketWatch) -- Asian stock markets were lower Tuesday after Wall Street's drop on Monday, with the Japanese market falling sharply as investors continued to fret about the yen's strength.

Soft U.S. data on Monday, including weak readings on personal income and Texas-area manufacturing activity, also kept many investors on the defensive.

Markets were looking past last week's comments from Federal Reserve Chairman Ben Bernanke that the Fed would act decisively to prevent the U.S. economy from sliding sharply.

"The Bernanke factor wore off in the U.S. after a day, and generally the economic data coming out this week, including U.S. August non-farm payrolls report and ISM manufacturing report, won't look very good. Unless there are definitive new measures to support growth the market's going to remain weak," said Hyundai Securities analyst Bae Sung-young in Seoul.

Japan's Nikkei Stock Average was off 2.1%, Australia's S&P/ASX 200 was 0.7% lower, South Korea's Kospi Composite fell 0.6% and New Zealand's NZX-50 dropped 0.6%. Dow Jones Industrial Average futures were down four points in screen trade.

In Tokyo, Wall Street's fall and the stubbornly-strong yen took their toll on the market. The Japanese currency advanced against the U.S. dollar despite the Bank of Japan's efforts Monday to stem the yen's rise, as investors considered its new monetary easing measures inadequate.

"Japan is giving investors the impression that it's running out of options to counter market weakness," said Kenichi Hirano, strategist at Tachibana Securities.

Defensive plays were outperforming, with Wesfarmers and Foster's both tacking on 0.5%.

"Our market looks pretty good," said UBS Head of Sales George Kanaan. "The reporting season was reasonably good. It's just this volatile U.S. market that is pushing us around but it was very thin overnight."

The Korean market was weighed by the generally depressed market sentiment and concerns about the global economic recovery.

Financial and tech stocks were leading the market down. KB Financial was off 1.9%, Woori Finance lost 1.8%, while Hynix Semiconductor fell 2.9% and Samsung Electronics dropped 1.3%.

New Zealand shares were tracking lower after a key survey on Monday showed business confidence had eased further in August. Adding to the gloom, the New Zealand Institute of Economic Research said Tuesday the country's economic recovery is faltering.

"The National Bank (confidence) survey yesterday and the NZIER comments aren't at all helpful," which is prompting investors to buy into defensive stocks, said Peter Sigley, institutional broker at Goldman Sachs. ING Property Trust was up 1.5% and Kiwi Income Property rose 1.1%.

Cyclical plays were lower, with Guinness Peat Group down 1.6%, Nuplex down 1.6% and Fletcher Building 1.5% weaker.

In foreign exchange markets, the yen rose against the U.S dollar and the euro on the view that the BOJ's moves Monday to stem the yen's rise lacked punch.

The dollar was fetching Y84.52, from Y84.55 late Monday in New York, while the euro was at Y106.92, from Y107.09. The single currency was buying $1.2648 against the dollar, compared with $1.2663.

Weak stock markets pushed the euro to an all-time low of CHF1.2935 against the Swiss franc as investors bailed out of riskier assets. The euro was recently fetching CHF1.2940.

"The difficulty for the Japanese policymakers is that any intervention has to be coordinated with other central banks for it to be effective. Going at it alone can be futile," said Khoon Goh, senior economist at ANZ bank in Wellington.

"The yen's rise is merely an outcome of the various tensions that exist in currency markets at present as investors navigate through an uncertain economic backdrop. After all, you don't buy the yen based on the fundamentals of the Japanese economy. So further yen strength looks likely in the near term," he said.

Lead September Japanese government bond futures were up 0.29 to 142.74 points on the Nikkei's fall and surge in U.S. Treasurys on Monday. The yield on 10-year cash JGBs was down two basis points at 1.000%.

Spot gold was at $1,236.80 per troy ounce, up 40 cents from late New York trade Monday. October Nymex crude oil futures were down 50 cents at $74.20 per barrel on Globex.

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